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Privatization Memories

March 28, 2015 3:45 pmMarch 28, 2015 3:45 pm

Dave Weigel has one of the more interesting Harry Reid retrospectives, focusing on his role in fighting back Bush’s attempt to privatize Social Security — and in particular on the way he forged an alliance with liberal bloggers.

I remember that episode very well, for several reasons. One was that I, too, was writing a lot, debunking one bad argument for privatization after another. It wasn’t the first time I had done that kind of thing,
but this was different in two ways: it was really intense, and for once my side of the argument won the political fight.

It was also a formative period for my perceptions of how policy arguments actually play out in modern America. There are always three sides here: the right, which isn’t interested in facts or logic; the left
(which isn’t very leftist in this country — they’re really center-left by anyone else’s standards); and self-proclaimed centrists, who have very little in the way of a constituency in
the country at large but have a lot of influence inside the Beltway.

And what you learned early on in the Social Security debate was that centrists desperately want to believe that there is symmetry between the left and the right, that Democrats and Republicans are equally extreme in
their own way. And this means that they are always looking for ways to say nice things about Republicans and their policy proposals, no matter how bad those proposals are. That’s how Paul Ryan ended up getting
an award for fiscal responsibility.

So back in 2005, Bush was making a dubious claim coupled with a complete non sequitur. First, the claim that Social Security was in crisis; second, that privatization was the answer, even though it would do nothing
at all to help the system’s finances. How could centrists say nice things about such a crude bait-and-switch?

I agree with Paul [Krugman] in that private accounts have nothing to do with solvency and solvency is the issue. I disagree with Paul because I think private accounts [are] a terrific policy and that in the information
age, you’re going to need different kinds of structures in the entitlement area than you had in the industrial age. But it is very hard to do that kind of change under these political circumstances where
you have the parties at such loggerheads.

The Democrats have for the last 10 or 15 years blatantly, shamelessly demagogued this issue. They’ve offered nothing positive on Social Security or on Medicare or on Medicaid, and it’s time for them
to compromise here.

Say what? To his credit, Klein later admitted that he was all wrong here. But the point is that what we saw here was the instinct
to come up with something, anything, that would let centrists pretend symmetry between the parties.

Incidentally, about Democrats doing nothing about Medicare and Medicaid: it’s interesting to look at budget projections made around the
time of the Social Security debate. Back then CBO projected that by fiscal 2014 Medicare spending would rise to $708 billion and Medicaid spending to $361 billion. The actual numbers for 2014 were 600 and 301, respectively, despite the Medicaid expansion under Obamacare. At least some of this unexpectedly low cost can be attributed to measures included in the Affordable Care Act. And strange
to say, this was achieved without destroying or privatizing the programs.

But back to 2005: what Harry Reid realized was that it was time to stop courting the Very Serious People and instead make an alliance with the DFHs — which isn’t quite shorthand for Dirty Foolish Hippies
— who, unlike the VSPs, were actually making sense on both the policy and the politics. It was an important turning point.